THE SUPERVISORY BOARDS REPORT DEVELOPMENT OF STRATEGY The rules of play for pharmaceutical companies have changed radically in the last few years. The sharper focus on health costs, the trend towards concentration, shorter product life cycles, and increased competition are realities to which every company has to adjust. In those same years, Lundbeck has adjusted its business strategy to the new market situation with the aim of consolidating and developing its position as a leading European supplier of psychopharmacological drugs and of establishing a platform for positioning itself within neurology. With this, Lundbeck is seeking to strengthen its niche position and to broaden its focus on CNS to include psychiatry and the pioneering field of neurology. For these reasons, the Supervisory Board recommends to the General Meeting that DKK 5.7 million of H. Lundbeck A/Ss profit for the year of DKK 217.6 million be paid to the employees in the parent company as profit sharing and that DKK 211.9 million be transferred to the reserves. ALLIANCES Recognising that critical mass is essential in the present competitive situation, Lundbeck attaches importance to strategic alliances. In the USA, we have established alliances that will mean rapid development and marketing of Cipramil®/Seropram® and in North and South America. The USA launch of Cipramil®/Seropram® is planned for mid-1998 through Forest Laboratories Inc. SALES The 26% improvement in turnover was due primarily to the continued success of Cipramil®/Seropram®, which has given Lundbeck a leading position in the market for antidepressants. This product is the Groups greatest success. Sales are still growing - compared with 1995 they have grown by more than 50% - and are expected to continue doing so because the product was only introduced in the big European markets, the U.K., France and Italy, in 1995. In 1996, Cipramil®/Seropram® was marketed in six new countries, including Germany, Spain and Ireland. In all, it has now been registered in 49 countries. 1996 was also the year in which Serdolect®/Serlect® was approved for marketing in 13 EU countries after a recordbreaking development time of only six years. Serdolect®/Serlect® belongs to the new generation of antipsychotic drugs, which have fewer side-effects than the classic antipsychotic drugs on the market. Serdolect®/Serlect® will be given a broad launch in 1997. Lundbecks established products are still doing well. That applies particularly to the antipsychotic products Fluanxol®/Depixol® and Cisordinol®/ Clopixol® in depot form. Lundbeck now has active sales subsidiaries throughout Western Europe with the exception of Portugal. In 1996, we established subsidiaries in Slovenia and Latvia. However, the rate of expansion was reduced in 1996 because we had achieved our aim of making Europe our home market. The challenge in the immediate future is to ensure continued progress in the big European markets and at the same time to expand our activities in Eastern Europe. Sales - breakdown by product RESULT FOR THE YEAR Lundbeck has achieved strong growth in the last few years, and 1996 was no exception. Turnover amounted to DKK 2,326 million, a 26% improvement on 1995. The pre-tax profit amounted to DKK 311 million, 36% up on 1995. The post-tax profit was DKK 219 million, against DKK 153 million in 1995, including a minority interest in the joint venture Promonta-Lundbeck. The result is very satisfactory, particularly in view of Lundbecks growth, which requires an enormous input of resources. The growth in the Group made great demands on all the employees in the past year and could not have been achieved without their committed input and willingness to adapt to change. Cipramil®/Seropram® Other antidepressants Serdolect®/Serlect® Other antipsychotics Other turnover 53% 9% 2% 22% 14% Sales - breakdown by market Europe Outside Europe 90% 10% 7 CONTENTS Supervisory Board and Board of Management . . . . . . . . . . . . . . . . . . . . 4 The Sup SPECIALISTS IN PSYCHIATRY PIONEERS IN NEUROLOGY As a specialist, one must constantly seek knowledge SUPERVISORY BOARD Arne V. Jensen (Chairman) Jørgen Fakstorp (Vice-Chairman) Lars Bruhn Henrik He BOARD OF MANAGEMENT Erik Sprunk-Jansen President Eva Steiness Executive Vice President Research and 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Net turnover (DKKm) 1,853 2,326 THE SUPERVISORY BOARDS REPORT DEVELOPMENT OF STRATEGY The rules of play for pharmaceutical companies 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Average number of employees Outs THE SUPERVISORY BOARDS REPORT The development of Serdolect®/Serlect® for the American market has tak ART OR THERAPY In 1988 a group of Dutch psychiatrists formed the Art & Psychiatry Foundation arr Art & Psychiatry Foundation is therefore to question the concept art and serve as a mediator bet THE VALUE OF CREATIVE THERAPY In spite of the lack of scientific studies of creative therapy, both p and the methods we employ. For me it is important to keep wondering, says Dr. de Groot. In this way, A STEP IN THE RIGHT DIRECTION Professor Norman Sartorius, President of the World Psychiatric Associa opment of a part of the national mental health programme in which Lundbeck and Grenlandsaksjonen wil NATURAL CONSIDERATIONS We have a major responsibility for the internal and external environment in c changes without taking the necessary precautions, and the knowledge that a defective filter or an ov FOCUS ON PARKINSONS DISEASE Lundbeck works in two main areas. For this reason we describe ourselves refers to various theories about heredity, environmental impacts, head trauma, side-effects of drugs A PRODUCT WITH POTENTIAL There is broad agreement that the development of specific serotonin-reuptak and on their family and social relations. In fact, the quality of life of patients with phobias is j ITS ALL ABOUT PREVENTION In 1993, Lundbeck, working in close cooperation with some of the worlds lea Preclinical tests show that preparations like Serdolect®/Serlect® do not affect the part of the brai LUNDBECKS PRODUCTS Lundbeck specialises in the development of new and better drugs for the treatment In April 1997, we sold the rights to Ketogan® and Ketodur® to Searle Scandinavia (a division of Mons LUNDBECK WORLDWIDE Lundbecks head office is situated in Valby, near the centre of Copenhagen. It hou Norway H. Lundbeck A/S P.O. Box 361 Lysaker torg 10, N-1324 Lysaker Tel: +47 6753 5372 Fax: +47 6753 THE LUNDBECK FOUNDATION AWARD FOR OUTSTANDING RESEARCH H. Lundbeck A/S is fully owned by the Lundbec ACCOUNTS SUMMARY FOR THE GROUP 1987-1996 Profit and loss account (DKKm) Net turnover Profit before R&D co Key figures Average number of employees Net profit ratio before R&D costs (%) Net profit ratio ( COMMENTS ON THE ACCOUNTS CHANGES IN ACCOUNTING POLICIES With effect from the annual accounts for 199 3,000 2,750 2,500 2,250 2,000 1,750 1,500 1,250 1,000 750 500 250 0 Turnover (DKKm) Cipramil®/Sero COMMENTS ON THE ACCOUNTS 100% 90% 80% 70% 60% 18 26 20 22 23 36 35 34 33 Cost structure (%) 28 Pro 450 400 350 300 250 200 150 100 50 0 -50 -100 -150 Cash flow (DKKm) 281 282 231 191 203 164 145 98 FINANCIAL COMMENTS GENERAL The Lundbeck Groups financial income and expenses in 1996 were influenced Lundbecks cash flows in foreign currencies in 1996 were concentrated around SEK, FRF, FIM and DEM bl ACCOUNTING POLICIES GENERAL The annual accounts and the consolidated accounts have been prepared in THE BALANCE SHEET INTANGIBLE FIXED ASSETS Intangible fixed assets are stated at cost less accumulate Win Van Niel, Daoux Rex, bronze, 35 x 25 x 8 cm. 40 PROFIT AND LOSS ACCOUNT PARENT COMPANY 1995 DKKm 1,042.8 469.1 157.3 160.8 255.6 221.2 12.7 5.9 41.2 BALANCE SHEET AT 31 DECEMBER ASSETS PARENT COMPANY 1995 DKKm 21.0 11.0 32.0 312.3 97.2 112.2 114.0 6 BALANCE SHEET AT 31 DECEMBER LIABILITIES PARENT COMPANY 1995 DKKm 110.0 14.7 25.5 785.1 935.3 1996 D STATEMENT OF SOURCES AND APPLICATION OF FUNDS GROUP 1996 DKKm 310.8 5.0 84.3 400.1 -47.2 -78.4 78.0 SIGNATURES Copenhagen, 24 April 1997 THE Erik Sprunk-Jansen President BOARD OF MANAGEMENT Ib D. NOTES 1 NET TURNOVER PARENT COMPANY 1995 DKKm 282.2 760.6 1,042.8 1996 DKKm 263.0 1,150.7 1,413.7 De Production, distribution, administration, and research and development costs include depreciation et NOTES 4 FINANCIAL ITEMS, NET PARENT COMPANY 1995 DKKm 44.4 1.4 30.4 2.8 79.0 43.4 5.5 8.8 57.7 21.3 6 FOREIGN CURRENCY TRANSLATION OF SUBSIDIARIES PROFIT AND LOSS ACCOUNTS AT THE EXCHANGE RATE RULING NOTES 7 INTANGIBLE AND TANGIBLE FIXED ASSETS GROUP: Research and Leasehold INTANGIBLE development im 7 INTANGIBLE AND TANGIBLE FIXED ASSETS - CONTINUED PARENT COMPANY: Research and Leasehold INTANGIBLE NOTES 8 SHARES IN SUBSIDIARIES Total Purchase price 84.8 4.1 -115.5 145.8 88.9 56.1 -3.2 39.5 -18.7 8 SHARES IN SUBSIDIARIES - CONTINUED Specified as follows: Equity value at 31.12.1996 DKKm 1.6 57.0 NOTES 9 OTHER SHAREHOLDINGS AND OTHER RECEIVABLES PARENT COMPANY Other shareholdings 4.5 1.6 -0.7 5. 11 PROVISIONS FOR DEFERRED TAX Timing differences between amounts as stated in the accounts and as c NOTES 13 DEBT PARENT COMPANY 1995 DKKm 378.2 27.7 141.7 547.6 10.3 11.7 22.0 569.6 18.2 84.5 0.0 50. 14 CHANGE IN INTEREST-BEARING DEBT GROUP 1996 DKKm Proceeds in connection with the raising of intere Marjanne Voolstra, Eerste berg, acrylic paint on paper, 100 x 70 cm. 58 INTEGRATED THERAPY When disease strikes, it is not just a case of a fault in the works that has to b The story of Lundbecks logo is rather unusual. It goes back to the 1930s and Paris, where Grete Lund